Taxation of trust

Tax queries 5416 views 5 replies

Amrita vyas

chartered accountant

2605 Points Joined April 2011

Whether basic exemption limit limit is applicable on trust..if yes, then please give me proper sec reference.

Thnx in adv

Replies (5)

CA SURENDRA KUMAR RAKHECHA

Practising CA at Surat

26263 Points Joined November 2009

The taxation of a trust is governed by section 11,12 & 13 of the Income Tax Act.

Since its income is generally exempt from the tax due to its CHARITABLE PURPOSE hence if 85% of its income is "applied" towards the object for which it is being run then the whole income is tax free hence no question of any exemption limit.

For example; if Total Receipts are Rs. 10 crores...and "application of income" i.e. incurring expenses and acquisition of assets are more than 8.5 crores; then the tax is not required to be paid.

tme s limted,bt drms r unlmtd

Mba ( fin.) Ca final Student

257 Points Joined January 2011

85% of income shall be applied before 5 years otherwise it will be taxable

K.T.Antony

Chartered Accountant

68 Points Joined September 2012

There is no basic exemption to the taxable income. If it is a charitable trust, exemptions available u/s 11 (1) (a) and Explanation 2 to section 11 (1) and also Section 11 (2) can be availed.

work is worship

Service

2728 Points Joined April 2008

Section 11 & 12 of the IT act covers on Trust.

Further as income from Trust is generally exempt from the tax due to its CHARITABLE NATURE & IF 85% of its income is "applied" towards the object for which it is being run then the whole income is tax free .

So the question of exemption limit does not arrise.

Apart from the above provisions a donor to such a trust or

institution is also entitled to benefit of deduction from his income on

account of the donation made by him. The amount of deduction is

prescribed in section 80G(2)(iv). Section 80G(5) contains preconditions,

which must be satisfied cumulatively, before the donation to the trust or

institution becomes tax deductible in the hands of a donor